Auditors' report slams Defence over vehicle maintenance

[GAP]

Auditors' report slams Defence over vehicle maintenance
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Sole-source contracts are not 'good value' as review estimates $8-million a year in possible savings
DANIEL LEBLANC

OTTAWA -- Auditors at the Department of National Defence are blasting a sole-sourced contract to maintain the military's fleet of light-armoured vehicles, saying the government is overspending at least $8-million a year for the work.

In particular, the auditors said management fees have expanded while subcontracting costs have gone unchecked.

"There are significant opportunities to achieve savings and better value for money," said the audit, which was posted recently on DND's website.

It said there was room for savings of "at least $80-million over the next 10 years of the contract," and that could reach $13.5-million a year.

The contract to maintain the Canadian Forces' light-armoured vehicles, such as the eight-wheeled Coyotes and LAV IIIs, was issued in 1998 and is still in place.

Even though the names of government suppliers are frequently released, DND said it had to shield the identity of this contractor to abide by the Access to Information Act.

"I cannot release that, and the reason why is that it might put the vendor in a negative light," DND spokeswoman Liana Cyr said.

But The Globe and Mail has learned the contract went to General Dynamics Land Systems Canada, which owns the company that manufactured the vehicles.

Ken Yamashita, a spokesman for General Dynamics, refused to comment on the document, saying it is an internal DND audit of the government's contracting practices.

When it was first issued nine years ago, the contract called for "life-cycle support" for 203 Coyotes. The deal grew over the years as the government purchased 651 LAV IIIs and other light-armoured vehicles.

The audit expressed concern that the initial "two-year, $4.3-million contract evolved into a six-year $67.9-million contract" by 2004. The contract was then renewed for three years, for a total of $200-million, and entails work on more than 1,000 light-armoured vehicles.
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[George Wallace]

My initial reaction, without reading the whole article, is to ask if the Auditor General would be in the habit of taking her FORD to a GM Dealer for Warrantee and Scheduled Servicing?

 

[career_radio-checker]

Auditors' report slams Defence over vehicle maintenance
Article Link

Sole-source contracts are not 'good value' as review estimates $8-million a year in possible savings
DANIEL LEBLANC

OTTAWA -- Auditors at the Department of National Defence are blasting a sole-sourced contract to maintain the military's fleet of light-armoured vehicles, saying the government is overspending at least $8-million a year for the work.

In particular, the auditors said management fees have expanded while subcontracting costs have gone unchecked.

"There are significant opportunities to achieve savings and better value for money," said the audit, which was posted recently on DND's website.

It said there was room for savings of "at least $80-million over the next 10 years of the contract," and that could reach $13.5-million a year.

The contract to maintain the Canadian Forces' light-armoured vehicles, such as the eight-wheeled Coyotes and LAV IIIs, was issued in 1998 and is still in place.

Even though the names of government suppliers are frequently released, DND said it had to shield the identity of this contractor to abide by the Access to Information Act.

"I cannot release that, and the reason why is that it might put the vendor in a negative light," DND spokeswoman Liana Cyr said.

But The Globe and Mail has learned the contract went to General Dynamics Land Systems Canada, which owns the company that manufactured the vehicles.
Ken Yamashita, a spokesman for General Dynamics, refused to comment on the document, saying it is an internal DND audit of the government's contracting practices.

When it was first issued nine years ago, the contract called for "life-cycle support" for 203 Coyotes. The deal grew over the years as the government purchased 651 LAV IIIs and other light-armoured vehicles.

The audit expressed concern that the initial "two-year, $4.3-million contract evolved into a six-year $67.9-million contract" by 2004. The contract was then renewed for three years, for a total of $200-million, and entails work on more than 1,000 light-armoured vehicles.
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Once again our privacy/security laws prove their worth, and the Globe and Mail proves its ethics.  :

 

[Edward Campbell]

Caveat lector: I was amongst the early proponents of contracting out and alternative service delivery; I remain convinced that it is the right way for military forces, including the CF, to go; I ‘walked the walk’ too, I ASD’d part of my own directorate - many, many years on I learned, from the responsible ADM in another government department, that the MOU between DND and the other agency had been renewed to the mutual satisfaction of both.

George Wallace’s analogy is apt: vendor service is often more expensive than what one might find on the open market if one did enough research and if one was willing to take a few risks.  Vendor warranty service is, also, I think often ‘bloated’ with costly but nonessential frills.

One of the areas which I advocated, unsuccessfully, for contracting out/ASD was that part of the ADM(Mat) Group which dealt with project and contract management.  I think that with most major., complex system - ships, aircraft and systems like the LAVIII and even wheeled fleets - it is/ought to be possible to do the sorts of detailed reliability, availability and maintainability (RAM) analyses during the contract definition phase (when DND has selected the final two candidate vendors and is negotiating final contract terms with them) which would allow PWGSC and DND to programme life cycle maintenance costs before the deal is done.  An arms length (contracted) agency could then use that money to negotiate maintenance and support contracts during the various stages of the system life cycle: the initial, low rate delivery and ‘burn in,’ in general service, and late/end of service life phases.

The growth in the numbers is a wee bit surprising - one, normally, expects high maintenance costs in the early and late phases of a system’s life cycle: the so-called bathtub curve.  Over a 30± year system life cycle I would expect to see high costs in the first 5 years, low costs in the next 15 years and high costs in the final 10 years.

I suspect - and this is a true wild arsed guess - that the initial $4.3 Million 2 year contract was ‘low balled’ because the vehicles were still being maintained under the terms of the initial delivery (capital) contract.  My guess is that the $10+ Million/year for six years is a ‘blended’ contract - some maintenance still being covered by the initial capital cost terms of the contract.  I think the increase from $10+Million/year to an average* (over the nine year term) of $20+ Million/year is too hard to analyze unless one knows how many vehicles were being maintained, quarter by quarter, over the 36 quarter term (nine years).  The contract started with 203 Coyotes, grew to 874 Coyotes + LAV IIIs and, finally, grew to include maintenance for “ more than 1,000 light-armoured vehicles.”

The numbers are, probably, higher than one might have negotiated had one the luxuries of:

1.  A large staff of specialists in ADM(Mat); and

2.  Adequate time for them to do their research and negotiate contracts.

Based on my personal observations many years ago I trust the AG’s numbers but I fell the AG’s people are, too often, constrained by being limited in the scope of their audits.  They can say: “you  are paying too much for vehicle maintenance” but they, most often, lack the time and staff necessary to add: “therefore, change the way you estimate and negotiate maintenance contracts from …… to …….”

 
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* I read this phrase “The contract was then renewed for three years, for a total of $200-million …” as meaning that the 6 year/$67 Million contract was renewed and expanded to include LAVIIIs and other vehicles built by GMDD/General Dynamics and that the total for all nine years was $200 Million.

 

[1feral1]

G'day all,

Personally, I don't have much time for Civvy contractors working on Defence equipment and on Defence establishments. Cutting corners to save bucks, corruption, fraud, bullying, theft (tools and even boat motors and yes the organised theft of small arms -- they were caught in a raid, but over time not one charge laid -unknown number of weapons never recovered--), doing said maintenance on paper (or portion of said maintenance), but not in reality, taking advantage of 'under paid' employees, or at times, hiring the dregs of society to perfome tasks in secure environments, pi$$ poor security vetting of employees (bike gang members, convicted crims and asian gang members working in a weapons storage area, foreigners in secure areas), slow and drawn out production times (too many smoke breaks and long lunches and early knock offs, high sick days), lack of proper training, slack and idleness beyond a joke, etc etc etc etc. Bloody hell, I could go on forever. I have seen this not only working on vehicles, but even on weapons!

That was in once Defence facility alone!

Think I am talking out my arse? Seen it all first hand, and I was disgusted! Mind you, there are some dedicated contractors, but in my opinion, they are the minority.

The CF has a Corps called EME. Time to pi$$ off the civvies, and give the trades back to the military where they belong. Many problems would be solved overnight.

Overall discipline and espirit du corps are non existant in such companies who leach off of Defence.

This can be accomplished over time.

My 2 cents,

Wes

 

[Wookilar]

Maybe I am being a bit thick here, but the only "support" I have ever seen from GD came when just received, brand new vehicles blew a major component.

I have worked on these vehicles since they were first delivered (both Coyote and LAV III) and I spoke to the GD (GM at first) rep on base maybe twice. The longest talk we had was about the compatability of the "GM long-life coolant" to regular coolant.

Is this contract talking about the cost of rebuilds and part supply? What else do they give us for "support"?

As for sub-contracts, the only one that I, as a maintainer, was ever aware of are the ones with a company in Calgary (and Winnipeg) doing Tranny rebuilds and the one in Edmonton with a Cat dealer for (minor) some stuff. Shouldn't the cost of said parts and services been included in the initial cost of the vehicles ($X for the vehicle, $Y for parts/services during its lifetime)?

Wook

Wes, we'd have to teach how to rebuild things again, not just replace parts. Certainly do-able, but we have to change our training cycle (again). Boy oh boy, I can not wait until I am in charge....of something.....ANYTHING......things wil change, I tell you.  ;D

 

[Edward Campbell]

G'day all,

Personally, I don't have much time for Civvy contractors working on Defence equipment and on Defence establishments. Cutting corners to save bucks, corruption, fraud, bullying, theft (tools and even boat motors and yes the organised theft of small arms -- they were caught in a raid, but over time not one charge laid -unknown number of weapons never recovered--), doing said maintenance on paper (or portion of said maintenance), but not in reality, taking advantage of 'under paid' employees, or at times, hiring the dregs of society to perfome tasks in secure environments, pi$$ poor security vetting of employees (bike gang members, convicted crims and asian gang members working in a weapons storage area, foreigners in secure areas), slow and drawn out production times (too many smoke breaks and long lunches and early knock offs, high sick days), lack of proper training, slack and idleness beyond a joke, etc etc etc etc. Bloody hell, I could go on forever. I have seen this not only working on vehicles, but even on weapons!

That was in once Defence facility alone!

Think I am talking out my arse? Seen it all first hand, and I was disgusted! Mind you, there are some dedicated contractors, but in my opinion, they are the minority.

The CF has a Corps called EME. Time to pi$$ off the civvies, and give the trades back to the military where they belong. Many problems would be solved overnight.

Overall discipline and espirit du corps are non existant in such companies who leach off of Defence.

This can be accomplished over time.

My 2 cents,

Wes

I don't want to say "ever" or "never' but in my service (going on a half century since I joined) military people - Signals, RCEME (and before them RCOC, etc) - have always played a fairly minor and specialized role in the maintenance chain.  Military personnel, generally, provide 100% of the first line/unit level maintenance and they are provide nearly all of the 2nd line (field) maintenance organizations, too.  At the 3rd and 4th lines - regional and national depots - most of the people doing the wrench bending and soldering were, and still are, a mix of civil servants and civilian contractor tech reps.

We have been doing 'contractor maintenance' since round about the Roman times when local smithies were 'contracted' to repair wagon wheels, etc.

We have seen civilian service delivery, including 'on-site' maintenance, in the field in World War II and, in the case of E-Systems support to MACV's telecommunications system, throughout much of the Viet Nam war, too.  Our warship sail, now and again - at least, with contractor tech reps on board whenever new systems are installed.  I can affirm that tech reps sailed with our naval task group to the Persian Gulf for Gulf War I - the business of integrating new (destined for the Halifax class CPFs) hardware on to the old, rusty steamers was waaaaay beyond the skill set of our sailors.

I can see little reason for military forces to recruit, train and then maintain people who will, in every important sense, work as civilian tradesmen in 3rd and 4th line/depot facilities.  We have, traditionally, in peace and war, hired civilians for that - civil servants, as often as not.

Further: I reject the idea that soldiers and sailors are, somehow or other, more honest or smarter than civilian tradesmen.  There is nothing to indicate that - all the evidence of dishonest civvies and lazy soldiers is anecdotal and not worth a bucket of warm spit.

There are valid and vital roles for both the military and civilian tradesmen in our defence materiel system.  The idea of putting uniformed people in depots is frightening and, in my professional opinion silly.

 

[The Bread Guy]

Correct me if I'm wrong, but I've found no reference to the Office of the Auditor General (OAG) of Canada in the news story, only references to "Auditors at the Department of National Defence".  Nothing is posted online at the OAG site (as of 12:13pm Eastern), so it sounds like an internal DND audit obtained via ATIP.

Given that, I'm curious about ER Campbell's remarks that these folk are mandated more for the "here's what doesn't work", as opposed to, "but here's what could work" scenarios.  Is this also the case for an internal auditor at DND?  Or are there so many auditors in and about the system, I'd have to be more specific?

 

[career_radio-checker]

...Or are there so many auditors in and about the system, I'd have to be more specific?

You know why Al-Quaida would never target an auditors office?
They could bomb one auditor's office but it won't serve any good. Because chances are there are 2 or 3 other auditors offices, fully staffed, watching the same damn department.
That might actually make the government run smoother and Al-Quaida can't have that. 

 

[Edward Campbell]

Correct me if I'm wrong, but I've found no reference to the Office of the Auditor General (OAG) of Canada in the news story, only references to "Auditors at the Department of National Defence".  Nothing is posted online at the OAG site (as of 12:13pm Eastern), so it sounds like an internal DND audit obtained via ATIP.

Given that, I'm curious about ER Campbell's remarks that these folk are mandated more for the "here's what doesn't work", as opposed to, "but here's what could work" scenarios.  Is this also the case for an internal auditor at DND?  Or are there so many auditors in and about the system, I'd have to be more specific?

The article does, I believe, refer to an internal DND audit.

In my (very dated) experience the lack of audit resources is common to the OAG and departmental audit branches.  If I remember correctly the internal audit groups were slashed, then combined, and then slashed again during the seemingly endless NDHQ reduction exercises in the '80s and '90s.

Effective audit is a key componet of good management.  I would argue that the audit function across every department of the Government of Canada is weak or, mostly, totally ineffective; that means management is poor, at best.

 

[The Bread Guy]

Effective audit is a key componet of good management.  I would argue that the audit function across every department of the Government of Canada is weak or, mostly, totally ineffective; that means management is poor, at best.

Can't comment on the comprehensiveness/lack thereof on this count, but I agree that without good "here's what's wrong" information, kinda hard to figure out "here's what to do" information....

 

[PO2FinClk]

In my (very dated) experience the lack of audit resources is common to the OAG and departmental audit branches.  If I remember correctly the internal audit groups were slashed, then combined, and then slashed again during the seemingly endless NDHQ reduction exercises in the '80s and '90s.

Chief fo Review Serviecs (CRS) became/took over "audit" functions of DND, and bases/Wings/ASU's now have "RACS" (Ressource Analysis Compliance Services). Apparently DND did not qualify or have entitlement to use the "Audit" term.

The official report is readily accessible from the "Chief of Review Services" website, dated June 06, for those with access to the DIN.

 

[flamingbear]

Having worked in a civilian to civilian automotive environment for over 20 years, I can say that any time bean counters get involved in cost control of maintenance it's usually a disaster.  Accountants, as you people like to put it out of their lane.  For example, one company has FIXED the cost per kilometer @ 25 cents including fuel, that's fine except that they've left it at 25 cents for the last 4 or 5 years.  At one point last fall one of the operator's had his oil changed and it put him over the limit for that month.  So whenever I hear how much can be saved on maintenance if we do this or that and a non-trade person is doing the talking I get pretty skeptical.

 

[1feral1]

There are valid and vital roles for both the military and civilian tradesmen in our defence materiel system.  The idea of putting uniformed people in depots is frightening and, in my professional opinion silly.

I respect your opinion Edward, and I hope my combined service of 31 yr hs some type of understanding.

As for civvy contractors, fine for non-SMP vehicls only, such as commercial pattern trucks and 'staff cars' etc. With waranty work, etc its fine to have the dealerships cover these. In Australia civy pattern vehicles are sold off by auction after 40,000km/2yrs, which ever comes first. I don't know what the CFs policy is with these type of vehicles.

Also in Australia, buses are leased too, so that takes more pressure off the fleet maintenance.

I have just seen too much negitivity with civvy contractors, say rebuilding MOGs and Land Rovers (and other types of Eqpt) and loss of confidence on such eqpt when its been recieved back into the Army. The quality of work is in many ways well below standard, yet we all pay for something worth much more. The civilianisation of the Defence Force, and this management created by this, seems to do nothing, but demand more with less, and damage morale to those stuck in the middle.

Having EME mechs spinning spanners with proper supervision, say with a WO overseeing a workshop (rather than some poorly trained civilian), answering to a Coy Comd (MAJ), not another over paid civvy, to me, ensures discipline, quality and professionalism, and would also give Defence Force Members better qualifications and ensure the job gets done right.

Again all good in my opinion, and there is nothing 'silly' with that.


Regards,

Wes